Jeffrey Balagna, a former Sears’ executive vice president, who in the course of his three years at the company had overseen areas like the retailer’s tech backbone as CIO and large home services offering, left the company last week.

And Sears President and Chief Member Officer Joelle Maher has also just left the company after only 17 months on the job, the company has confirmed. In that role, she oversaw the strategy for the Shop Your Way loyalty program, on which Sears has bet its future viability after years of large sales declines, at the company’s namesake stores. Sears Holdings also runs Kmart. (Earlier this year, Sears’ finance chief left but has since been replaced.)

These departures came as Steve Mnuchin, the former Goldman Sachsgs executive tapped by President-elect Donald Trump to be the country’s next Treasury secretary, stepped down from the board of Sears last week. Mnuchin, who was a Yale roommate of Sears Holdings’ CEO Eddie Lampert, joined the board in 2005 after Sears merged with Kmart, where he had been a board member.

During that time, the retailer has not reported any year of comparable sales increases despite a number of turnaround efforts. The Sears and Kmart chains have closed hundreds of stores each in recent years. Mnuchin’s departure reduced the size of the board to nine directors. None of the remaining directors, other than Lampert, have ever been c-level executives at a retailer.

Though it is not unusual for a major retailer to have a certain amount of executive churn – Targettgt has had a number of top executives leave in the last few months, raising concerns about its efforts heading into the fourth quarter – or for that to portend bad holiday season results, the departures could signal Sears is having difficult retaining talent at a time its turnaround plan is failing to gain traction.

Lampert has repeatedly insisted in the last few years that Sears was reinventing itself as a membership-focused retailer that will need less physical space. But those efforts have been to little avail so far: In its most recent quarter, Sears Holdings (which also owns the Kmart discount chain) reported comparable sales fell 5.2%. In the first half of the current fiscal year, Sears has lost $866 million, adding to the $8 billion it lost between 2010 and 2015. Sears has sold off many top assets to generate cash and stay liquid.

One of the linchpins of Sears’ efforts has been its Shop Your Way program, widely seen as a state-of-the-art loyalty program. A growing percentage of Sears and Kmart’s sales have gone through the SYW platform, a bright spot for Sears, making Maher’s departure all the more notable.

Sears is scheduled to report third-quarter results on Thursday morning.

The burrito chain’s stocks took a 6% dive in early trading Tuesday after co-CEO Steve Ells admitted at a Barclays conference he has concerns about Chipotle’s ability to recovery from the food safety disaster last year and hit ambitious 2017 sales goals in what has become a protracted sales decline.

The one time Wall Street darling’s same-store sales have plummeted for four straight quarters after E. coli outbreaks last year sickened dozens of customers 14 states- the drop was 21.9% in its most recent quarter, and the pace of decline has hardly abated. Ells said he was “nervous” about hitting the 2017 sales forecast Chipotle gave out in October. Lines are back at Chipotle, but Ells admitted that had more to do with worsening service than any big improvement in business.

The crisis landed the company in the crosshairs of billionaire activist investor Bill Ackman, whose Pershing Square Capital Management took at 9.9% stake in Chipotle in September, seeking multiple seats. Ells said Chipotle expects to make an announcement shortly about a new slate of board members. He acknowledged many had been on the board for a very long time and hinted Ackman could get a spot.

In addition to the sales collapse, discounting and a big marketing campaign have slammed Chipotle’s bottom line: adjusted earnings came in at 56 cents a share last quarter, well below analysts’ expectations for earnings of $1.56. That compares to $4.59 a share a year earlier. Chipotle has projected a high-single digit percentage same-store sales increase and earnings of $10 a share for 2017.

“Chipotle’s third-quarter earnings reinforces our thesis that the path to recovery remains slow and the brand has yet to regain credibility with the consumer. Therefore, we believe it’s too early to buy the stock, as same-store sales remain well below pre-incident [pre-E. coli] levels, despite aggressive promotions,” said Canaccord Genuity analyst Lynne Collier in a research note.

This weekend's Fortune/TIME Global Forum left me convinced that global business is at a tipping point. The shareholder-first model that guided many companies in the post-World-War II era is dying, and a new model is struggling to emerge. The change has a number of causes, but chief among them:

The stagnating growth and inequality in developing countries that has left more than two-thirds of those populations with flat or declining incomes for the last decade (see McKinsey Global Institute report Poorer Than Their Parents.)

The aspirations of a new generation of leaders and workers who sincerely want to build a better world.

The group that gathered in Rome was a self-selected lot, and might be viewed as preaching among the choir. Even so, it's a chorus whose members wield considerable influence. It included CEOs from companies employing some 4.7 million people, including McKinsey, Siemens, IBM, Barclays, Shell, Flex, Lenovo, Allstate, Monsanto,United Technologies, Sprint, Telecom Italia, Campbell Soup, Virgin Group, Walgreens Boots, WPP, Novartis, Dow Chemical, Hyatt, Deloitte, Boston Consulting Group, Baxter, Teneo, Insigniam, Mastercard and more. In their deliberations, they agreed to 20 specific actions to address global economic and social problems, ranging from building a corps of community health workers in poor regions of the world, to creating digital identities for the 2 billion people who lack access to financial services, to educating and training displaced, unemployed and underemployed workers.

The actions proposed were not charity, but rather a different way to think about their businesses. Attendees urged their business colleagues to embrace under-served markets, expand basic health services, and improve worker training as part of their core business activities. Their underlying assumption was that such efforts will only be sustained if they are also profitable.

The group's report was shared Saturday with Pope Francis, who has been an advocate of broader prosperity and a sometime critic of business. In an unexpected move, the Pontiff took time to shake the hands and look into the eyes of each of the CEOs. The Pope is one of the few leaders who has retained an aura of moral authority in this age of outrage. The lesson for CEOs: they need to boost their own moral authority to thrive in the years ahead.

You can read more coverage of the forum here and a full report on the proceedings here.

]]>http://fortune.com/2016/12/05/time-fortune-global-forum-manifesto/feed/0amurrayfortuneDeutsche Bank Wants Bonus Millions Back From Its Former CEOshttp://fortune.com/2016/11/17/deutsche-bank-clawback-ceo-bonuses/
http://fortune.com/2016/11/17/deutsche-bank-clawback-ceo-bonuses/#respondThu, 17 Nov 2016 17:48:45 +0000http://fortune.com/?p=1861513]]>Deutsche Bank db, facing billions of dollars in fines from the U.S. Deparatment of Justice and other regulators, is looking to claw back some of the millions it paid to the managers who landed it in its current state.

The German daily Sueddeutsche Zeitung reported that the bank is looking to reclaim tens of millions of euros in bonuses from its three most recent CEOs-Josef Ackermann, who ran the bank from 2002 to 2012, and his successors Anshu Jain and J?rgen Fitschen.

The amounts at stake-likely to be in the tens of millions of dollars-pale in comparison to the possible fine of $14 billion that the Department of Justice has said it wants to impose for Deutsche’s alleged fraudulent activity surrounding the sale of mortgage-backed securities before 2008. But, with the share price down over 80% in the past three years, with staff intensely unhappy at the savage job cuts announced over the past year, and with the government embarrassed at speculation that it may have to bail out Germany’s only bank of global stature, current CEO John Cryan is under enormous pressure to make sure that previous bosses share the pain.

The largest sum that could possibly be clawed back, 10 million euros ($10.7 million), affects Jain, who was co-CEO with Fitschen for three years between 2012 and 2015 (Fitschen stayed on till May 2016, when John Cryan took over as sole CEO). Jain had been co-head of Deutsche’s corporate and investment bank in the years leading up to the financial crisis.

As such, Jain carried a substantial, if notional, responsibility for the market activities that have landed Deutsche in such hot water as regulators, investors, and customers have turned on it in the last few years. He became sole head of the investment bank in 2010, a year in which he earned nearly 12 million euros compared to Ackermann’s 8.8 million.

German law has few provisions for clawing back money that has already been paid out to managers. However, it does allow ‘non-vested’ compensation to be suspended. That suggests that getting much money back from Ackermann, who left in 2012, will be especially problematic, as most of his bonuses, even the deferred portions, will already have been paid out. According to Sueddeutsche, Jain is the most exposed, with the bank looking at clawing back at least 10 million.

In Deutsche’s 2015 financial report, which including the bank’s biggest one year loss in its history, the supervisory board said it had already decided to suspend bonus installments that were to be paid in 2015, affecting 11 current and former managers.

Reuters said Jain declined to comment on the report. Ackermann was not immediately available for comment.

Deutsche was fined $2.5 billion in 2015 for rigging the worldwide market for short-term lending (and for obstructing the investigation into it by U.S. and European regulators), and had been fined 725 million euros for rigging Euribor, another interest rate benchmark, two years earlier.

]]>http://fortune.com/2016/11/17/deutsche-bank-clawback-ceo-bonuses/feed/0Ackermann Makes Way For Jain And Fitschen At Deutsche BankgeoffreytsmithWhole Foods Is Making a Drastic Change to How It Is Runhttp://fortune.com/2016/11/02/whole-foods-corporate-structure/
http://fortune.com/2016/11/02/whole-foods-corporate-structure/#respondWed, 02 Nov 2016 21:12:13 +0000http://fortune.com/?p=1846930]]>Whole Foods Marketwfm will soon no longer have two CEO’s, ending an enduring but unusual management practice by the grocer.

The upscale retailer said on Wednesday that co-founder John Mackey would become the sole CEO on Dec. 31, while Walter Robb will stay on as a director. Robb has been co-CEO for six years and with the company for 25. According to a regulatory filing, Robb will among other perks get a $10 million severance, and perhaps more valuable from a monetary standpoint, he gets a lifetime 30% discount on purchases made at Whole Foods.

The move will end an unusual co-CEO structure and put Mackey solely in the driver’s seat as Whole Foods expands its lower-price 365 chain and looks to return to growth in its main business. Still, Robb was credited for helping turn Whole Foods into a high-end grocery juggernaut.

“Under Walter's leadership, Whole Foods Market has grown from 12 to 464 stores in three countries,” said John Elstrott, Whole Foods’ chairman. Whole Foods also announced that Mary Ellen Coe, Vice President of Sales and Product Operations for Google, has joined its board. There are relatively few large public companies with co-CEO arrangements, notably Oracleorcl and Chipotle Mexican Grill. cmg

Whole Foods’ challenges look like they’ll persist for a while. Comparable sales fell 2.6% in the quarter ended Sept. 25 and continue to slip in the current quarter, dropping 1.6% through Oct. 30. Mackey said in a statement that there had been many “headwinds” in this past year for food retailers.

Whole Foods reported earnings of 28 cents, above Wall Street forecasts for 24 cents. Total revenue was $3.5 billion, in line with investor expectations. Grocers have been hit by food deflation and aggressive pricing by Walmartwmt, the largest food retailer in the United States.

The company has been trying to attract younger customers, notably by recently beginning to test sales of Purple Carrot's vegan meal kits, joining forces with one of many startups that threaten mainstream grocers by delivering boxed, cook-at-home meals.

Barnes & Noblebks said in a recent regulatory filing that it would pay the CEO it fired in August after less than a year on the job $4.8 million to end all claims both parties were making again each other.

The struggling bookstore chain ousted former Chief Executive Officer Ron Boire this summer only 11 months after he took the reins, saying he "was not a good fit" in unusually harsh language for such a corporate announcement. The exit, the third time a CEO has left Barnes & Noble in three years, plunged Barnes & Noble into new turmoil just as it tries to execute a new turnaround plan.

In the U.S. Securities and Exchange Commission filing last week, Barnes & Noble took a decidedly gentler tone, saying it “regrets that things did not work out for the longer term” and wished Boire well in the future.

But after Barnes & Noble's business had stabilized as the growth of e-books slowed, there were new signs of pressure on its core selling business: in the fourth quarter of fiscal 2016 ended in April, Barnes & Noble's comparable-store sales fell 0.8% and the company expects those figures to rise only modestly in the current fiscal year. And its website was still being rebuilt this year, an extraordinary handicap for competing with Amazon.com.

The company never said explicitly why it had fired Boire. But on a conference call in September to discuss first quarter results, Leonard Riggio, the company’s founder, top shareholder, chairman, and interim CEO told Wall Street analysts Barnes & Noble had “shot itself in the foot somewhat by making unprecedented inventory reductions.” That deprived the bookseller unnecessarily of sales. And he also lamented expense cutting decisions that meant less sales staff on the floor, hurting customer service.

Barnes & Noble is once again conducting a CEO search, but Riggio said on that conference call that the bookseller will take its time this time around.

]]>http://fortune.com/2016/11/02/barnes-and-noble-ceo-payout/feed/0Inside A Barnes & Noble Inc. Location As New CEO Sees Non-Book Items As Key To HolidayspwahbaHow Many Insiders Does it Take to Change a Bank?http://fortune.com/2016/10/27/how-many-insiders-does-it-take-to-change-a-bank/
http://fortune.com/2016/10/27/how-many-insiders-does-it-take-to-change-a-bank/#respondThu, 27 Oct 2016 11:27:30 +0000http://fortune.com/?p=1841062]]>

Can an insider succeed at changing Wells Fargo's culture?

That's the question hanging over new CEO Tim Sloan, a 29-year veteran of the company who previously served as COO and CFO. Sloan paid a visit to Fortune yesterday, in the early stages of his campaign to rebuild the badly battered reputation of the bank. He said he received the same advice from a number of business mentors before taking the job: "You've got to make sure you are ready for it, because it is not going to be easy."

That may be an understatement. The bank is hemorrhaging customers, and Washington is out for blood. Hillary Clinton said Wells Fargo is part of the "rigged system" that is crushing the middle class; Elizabeth Warren wants Sloan to answer: what did he know, and when did he know it?

In a speech to his employees two days ago, Sloan reviewed steps the company is taking to address the problem, but acknowledged the scandal won't end quickly. "This work to restore trust in Wells Fargo is going to play out over a long period of time - weeks, months, maybe years. So let's be patient and strong. Let's demonstrate perseverance."

In addition to perseverance, the company also is engaging independent "culture experts" to "help us understand where we have cultural weaknesses that need to be strengthened or fixed. We know we don't have all the answers and want to have the courage to learn from others."

I suggested Sloan reach out to GM CEO Mary Barra, another company lifer who faced an ignition scandal when she became CEO, and rejected the advice of colleagues who told her to persevere until the company got over it. I don't want to get over it, she replied. "I don't want to set it aside and explain it," she said to Fortune'sGeoff Colvin in 2014, "because I think it has uncovered some things in our company that it's critical we challenge ourselves to change and to fix."

]]>http://fortune.com/2016/10/27/how-many-insiders-does-it-take-to-change-a-bank/feed/0BRB.11.01.16amurrayfortuneChipotle Board Is Back in the Spotlight with Ackman Stakehttp://fortune.com/2016/09/09/chipotle-board-ackman/
http://fortune.com/2016/09/09/chipotle-board-ackman/#respondFri, 09 Sep 2016 16:40:26 +0000http://fortune.com/?p=1792070]]>Chipotle is in the spotlight again this week after activist investor Bill Ackman revealed a nearly 10% stake in the burrito chain. The investment community expects Ackman to agitate for change to the company’s board, which has previously been under fire for everything from its insular composition to CEO compensation.

The following, from a piece I published in April called “Chipotle’s Board Feel the Heat from Agitating Shareholders,” takes a closer look at the company’s directors. At the time, CtW Investment Group was calling for changes to the Chipotle board after the company had endured a series of food safety issues. The company’s financial and stock performance has continued to suffer as a result, making it a target for Ackman.

Chipotle CMG has a new problem--and this one has nothing to do with the company's food.

CtW Investment Group, which works with union-backed pension funds that hold some 55,000 Chipotle shares, wants the fast-casual Mexican-food chain to shake up its board in the wake of the company's food safety crisis.

In a letter to shareholders, CtW called Chipotle's group of directors "one of the least diverse, least independent boards among the S&P 500."

CtW's funds hold a relatively negligible stake, but CtW has a history of agitating for governance reforms. It was a vocal player in pushing for compensation reform at Chipotle in 2014 (more on that later).

[Chipotle did not respond to Fortune‘s requests for comment at the time of the original publication but today offered the following from spokesman Chris Arnold: “All of our directors were re-elected in last year's shareholder vote. We are currently interviewing for one additional board member, and are considering additional changes to our board to accommodate longer-term needs. I might also add that we are in the process of adopting proxy access provisions based on the results of last year's vote.”]

Here are a few of the key issues CtW called out in the letter to shareholders that it made public:

"Excessively long director tenure." The median tenure for a Chipotle director is 17 years, with six directors having served for more than a decade, the letter said. Four of the seven outside directors were appointed while the company was private, which CtW calls a "management-dominated process." Two directors are former McDonald's MCD executives and have been on the board since the fast food giant owned Chipotle. (Read this for more on McDonald's governance issues.)

"A shocking dearth of racial and gender diversity." The letter notes that 100% of the directors are white and only one is a woman.

Three of Chipotle's seven outside directors have ties to Denver and Boulder, Colo., where the company is headquartered and the co-CEOs attended college.

To sum it up, the letter charges that Chipotle has outgrown its board. "They replicated the mom and pop recipe, and that's probably what contributed a lot to their success," says Jim Neale, a partner with law firm McGuireWoods, who specializes in food safety defense. "But there's a level of sophistication that you need if you're going to do things on a large scale so you can respond to large-scale problems."

Larry Fauver of the University of Tennessee's Corporate Governance Center said of the board, which has only one independent director who is currently a Fortune 500 executive: "You would expect a little more fire power."

In addition to two directors who had stints at McDonald's, another company popped up more than once: Syntex Corporation, which was acquired by Roche in the mid-1990s. Both Neil Flanzraich (a Chipotle director since 2007) and Darlene Friedman (a director since 1995) worked for the pharmaceutical company at one time. Founder and co-CEO Steve Ells's father, Bob Ells, was once a senior executive at Syntex and was the first financial backer of Chipotle. A 2015 oral history of the company from Bloomberg noted that in the early days the board was made up of almost entirely of family friends.

Chipotle lists only two directors as not being independent--co-CEOs Ells and Monty Moran. But the Syntex connection is an example of what governance experts call "soft" ties. "When I think about independence, there are two flavors," explains Hillary Sale, a professor of law and management at Washington University's law school. "One is financial and one is state of mind. The state of mind standard is what we call a 'beholdenness standard'--can they think independently? It's much harder to measure and is not regulated by the federal government."

Until September, Friedman and Patrick Flynn--a director since 1998 and one of the two former McDonald's executive--had been the only two members of the compensation committee and also held the distinction of being among the longest-serving directors. CtW in its letter specifically called for shareholders to "withhold support" for the reelection of Friedman and Flynn.

"The longer you are on the board, the more comfortable you become with management and what management is doing," says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "Where you see oversight failures, you will oftentimes see folks who have been there a long time and have soft or hard ties to management." Elson says that Chipotle situation seems to be of that flavor.

Chipotle's pay structure has been under scrutiny since CtW pushed for shareholders to vote against the company's executive compensation in 2014. Equilar, in collaboration with The New York Times, rated Ells the No. 27 highest-paid CEO in 2014, with Moran coming in at No. 31. If you added their compensation together as co-CEOs, they would have ranked No. 10.

Ultimately, 77% of shareholders who voted opposed the compensation plan that year.

"That only happens in extreme cases," says corporate governance expert Nell Minow. "It sends a serious message. It's an indicator of a weak board." Elson noted that it "symbolized a board that seems to be a little out of touch."

In September 2015, a third director, Flanzraich, was added to the compensation committee and became its chair. The company also hired two compensation consulting firms and later announced big pay cuts for the co-CEOs in the wake of negative financial results caused by the food-borne illness issues.

Chipotle has made two additions to its board in recent years, adding Stephen Gillett, a senior executive at Google[x] and a former Starbucks CIO last year, and in 2013 entrepreneur Kimbal Musk (the brother of Tesla founder Elon Musk) joined the board. Musk does not sit on any committees.

The company disclosed in its proxy that Chipotle's charitable foundation gave a non-profit organization founded by Musk a grant of $250,000. It also said that it had a "business relationship" with Google Inc., where Gillett works.

]]>http://fortune.com/2016/09/09/chipotle-board-ackman/feed/0chipotle-ackmanbkowittHow Viacom Could Have Avoided Sumner Redstone’s Legal Dramashttp://fortune.com/2016/08/29/sumner-redstone-viacom/
http://fortune.com/2016/08/29/sumner-redstone-viacom/#respondMon, 29 Aug 2016 13:58:36 +0000http://fortune.com/?p=1761892]]>It's been said one should never let a good crisis go to waste. And for that reason, I am sorry that Viacom's former CEO Philippe Dauman is leaving so soon, putting an end to the vicious courtroom battles that erupted this summer.

While the human tendency is to move on, Viacom's recent troubles deserve further scrutiny. The media company’s boardroom problems demonstrate the need for corporate disclosure and public company listing standard reform.

Under the domination of a controlling shareholder, many boards, not just Viacom's board, fail to perform as they should to protect the interests of all shareholders and stakeholders. Often, in practice, these directors end up operating as mere advisors rather than overseers. In some instances, directors find that role disturbing.

"What are best practices in these situations. ... Am I just a token director?" a board member at a controlled company wrote me recently.

The question is apropos at Viacom, where directors re-nominated controlling shareholder Sumner Redstone to the board in 2016 despite his failure, according to a Fortune report, to attend board meeting in person in 2015 and 2016. In-person attendance is crucial to good board communications. You have to be there to witness facial expressions and participate fully in the conversations.

So why did the Viacom board re-nominate Redstone? Did the directors believe they had no choice? The Viacom board also re-nominated Redstone, even though Frederic Salerno, a member of Viacom's governance and nominating committee, asserted in a June court filing that the 93-year-old media mogul "lacks the capacity to make decisions concerning the future of his companies...can no longer stand, walk or maintain coherent communication. He can no longer read or write."

Clearly, backstops are needed to protect shareholders and stakeholders when a board's nominations processes break down. Federal securities laws use disclosure as the primary means to alert shareholders (and stakeholders) to a company's governance failures. But for disclosure obligations to matter, the rules must require honest and fulsome disclosure -- and they must be enforced. Stock exchange listing standards provide another way to protect shareholders and stakeholders from poor nominations processes, but currently they too are ineffectual.

The Viacom case confirms that existing disclosures about board nominees are inadequate. In the proxy, Viacom shareholders were told that Redstone was nominated partly because of his "understanding" of the industry. This disclosure is insufficient if the incapacities Salerno alleges are true. It's time to consider minimum qualification standards for board members in listed public companies (for example, the ability to make decisions) and disclosures that address those basic qualifications.

The case also shows how misleading the SEC’s disclosures regarding board meeting attendance can be. The Viacom proxies state that from 2011to 2015, "each of [the Viacom] directors attended more than 75% of the meetings of the Board." Would any normal reader guess from this that Sumner Redstone never attended a board meeting in 2015 in person?

University of Pennsylvania securities professor Jill Fisch says the SEC has not defined attendance, and it is presumed that each company uses the definition of attendance found in the state corporation law where the company is incorporated. For Viacom, that's Delaware, where attendance could mean just dialing in, even for a meeting that is supposed to be in person.

New disclosure requirements could help fix this. The Council of Institutional Investors (CII), which represents members and associate members with over $23 trillion in assets under management, recommends: "Companies should disclose individual director attendance figures ... [and] should distinguish between in-person and telephonic attendance." In response to a request for this article, Viacom did not provide information on who attends the Viacom board meetings by phone and who attends in person.

Of course, for better disclosure to work, the SEC must take enforcement seriously. The SEC did not provide comment for this article on how it enforces the current disclosure rule that may reference 50 different state statutes to define attendance. Fisch says she is unaware of any instance in which the SEC has asked a company to correct its board meeting attendance disclosure.

The independence of directors is important at all companies, and especially ones with a controlling shareholder. But current stock exchange listing standards do a poor job of assuring board member impartiality. In New York, a judge ruled in 2006 that the Viacom board was incapable of acting on behalf of minority shareholders and a demand on the board to do so "would be futile." The Redstones directly appointed Viacom's newest board members. And many of the old-time Viacom board members have numerous ties to the Redstones and each other that escape listing standard scrutiny and allow the directors to be called independent when they really aren't. Strengthening independence standards would improve disclosure and encourage less clubby board memberships.

The Viacom case suggests other fixes that would also have applicability more broadly, like listing standards that require equal voting rights for shares at public companies. If none of the above works, perhaps more drastic measures are in order. Perhaps companies should not be allowed to go public if it will result in one person or family owning a greater than 20% stake or voting power.

Clearly remedies are required. Viacom may represent the ghost of some companies' futures, especially firms like Facebook and Google, with multiple classes of shares. But its significance is broader. Trust in markets are destroyed when companies are not forthright with investors -- and board members and other backstops are lackadaisical. If markets are to be other than gambling magnets, listing and disclosure standards - and enforcement by the SEC - must be improved.

Eleanor Bloxham is CEO of The Value Alliance, an independent board education and advisory firm. She is the author of two books on corporate governance and valuation.

]]>http://fortune.com/2016/08/29/sumner-redstone-viacom/feed/0SUM.06.15.16 Redstone DaumaneleanorbloxhamVW’s Battle With Contractors Gets Unusually Messyhttp://fortune.com/2016/08/22/vw-supplier-dispute-production/
http://fortune.com/2016/08/22/vw-supplier-dispute-production/#respondMon, 22 Aug 2016 17:45:04 +0000http://fortune.com/?p=1773769]]>The decision of the world’s largest automaker to take on a feisty Bosnian entrepreneur who supplies it parts is backfiring spectacularly.

Volkswagen AG vlkay said Monday it had stopped, or partially stopped, work at six of its biggest assembly plants, affecting a total of 28,000 workers, due to a contract dispute with two component suppliers, ES-Automobil Guss GmbH and Car Trim GmbH (both ultimately controlled by the privately-held Prevent Group of Nijaz Hastor).

The two companies have been refusing to supply VW with transmission components and seat covers since Thursday, in protest of VW’s decision to cancel a major contract with the group two months ago.

It’s highly unusual for contractual disputes in consensus-obsessed Germany to play out so bitterly and publicly. The reason this one is doing so is, ultimately, a consequence of VW’s struggles since its diesel emission scandal exploded early a year ago.

“The way in which VW is treating its suppliers is in no way acceptable and can ruin any small company,” ES-Automobilguss chief operating officer Alexander Gerstung told Sueddeutsche Zeitung at the weekend.

“The suppliers are playing a filthy game with us,” Bernd Osterloh , head of VW’s Works Council, told the newspaper Bild Monday. “It makes me furious.”

When Matthias M?ller took over as CEO in September, one of his first acts was to seek 1 billion euros (roughgly $1.12 billion) in cost savings. But VW is famously unionized, and the head of its powerful Works Council, Bernd Osterloh, was determined to stop any job losses.

“As long as I’m head of the Works Council, there’ll be no job cuts due to business issues. The core workforce is the core workforce,” Osterloh told Bild. “If anyone thinks they can cut that, then we’d have to cut the management too.”

Osterloh, who is also deputy chairman of the supervisory board, is often referred to as the single most powerful man at VW, even ahead of M?ller. Management would have to look elsewhere for savings.Management would have to look elsewhere for savings.

According to Manager Magazin, VW’s group head of purchasing, Francisco Javier Garcia Sanz, wrote to suppliers in June that the company “must be much more efficient in its purchasing costs...We want to achieve that through cooperation, but also with the necessary thoroughness.”

It soon became clear what VW meant by “necessary thoroughness.” At the end of June, according to Sueddeutsche Zeitung, VW canceled–by fax–a 500 million euro ($555 million) contract with Car Trim, citing alleged quality defects in leather seats delivered for the Touareg and the Porsche Cayenne.

The Prevent companies sued for 50 million euros in compensation for work they had already done on its facilities ahead of the contracted deliveries. VW refused to pay. So Prevent refused to deliver. And so to court they went.

As ever when VW is concerned, the game is being played out with one eye on the politicians who partly own the company. The balance of power in such contract disputes is normally with the automaker, due to its greater name recognition and its greater importance to the local tax base. But with public sympathy for VW badly damaged by the diesel scandal, Prevent has sensed that this would be a good moment to present itself as a plucky underdog unjustly bullied by a corporate giant. Olaf Lies, the economy minister for the state of Lower Saxony who is also a VW board member, said Monday that if the dispute drags on, “I can’t even think about the effects that this will have. It’s not at all clear how we will deal with that.”

According to Stefan Bratzel, a director of the Center of Automotive Management in Bergisch Gladbach near Cologne, it’s a high-risk strategy for Prevent. Bratzel told German public TV station ARD that it “could be committing hara kiri...it jeopardises further orders and it exposes itself to huge risks of compensation claims.”

A court in Braunschweig has already ordered Prevent to continue meeting its own contractual obligations. But VW’s plant stoppages are likely to last at least until the end of the week: Prevent’s appeal against VW’s injunction will take until Aug. 31, according to Automative News. In the meantime, VW has applied for permission to seize any relevant stockpiles with the help of court bailiffs.

Analysts estimate the cost to VW is likely to be in the tens of millions of euros. Bratzel said they could easily top 100 million euros if the dispute drags on.

But while VW may be acting the injured party, the temporary closures may not be entirely unwelcome. Sales of the Golf, usually its most popular model, were down 14% on the year in July in Germany, and down 9% in the year-to-date, a shocking drop for the local market leader. Across Europe, the damage to its image from Dieselgate has put the VW brand under pressure despite aggressive discounting. While overall EU car registrations were up 9% in the first half, VW brand sales were only up 0.8%. A pretext to cut output could be useful.

“We’ll survive because we make cool cars like the new Tiguan,” Osterloh told Bild. “But unfortunately hardly anyone is talking about our cars at the moment.”

]]>http://fortune.com/2016/08/22/vw-supplier-dispute-production/feed/0APTOPIX Germany Volkswagen EarnsgeoffreytsmithDauman Set to Leave Viacom With $72 Million Pay-Offhttp://fortune.com/2016/08/19/dauman-redstone-viacom-settlement/
http://fortune.com/2016/08/19/dauman-redstone-viacom-settlement/#respondFri, 19 Aug 2016 12:58:21 +0000http://fortune.com/?p=1772760]]>Viacomviab and controlling shareholder Sumner Redstone have come to an agreement on terms of a settlement that would result in the departure of chief executive Philippe Dauman, two sources familiar with the situation said Thursday.

The settlement would end the battle for control over Redstone’s $40 billion empire that includes Viacom and CBS, and which has been a source of shareholder angst and months of uncertainty.

It would also conclude the legal battle between Dauman and Redstone in Massachusetts over the CEO’s removal from National Amusements Inc, the privately held company that holds Redstone’s Viacom and CBS Corp voting shares, as well as the trust that will determine the fate of both media companies when the 93-year-old dies or is deemed mentally incapacitated.

Under terms of the settlement, if finalized, Dauman, 62, will receive a golden parachute of $72 million, the sources said. Viacom’s shares have badly under-performed the broader stock market during Dauman’s 10-year tenure, and have risen as much in the last three months (as rumors of his imminent departure increased) as they had done in the previous nine and a half years. Since he became CEO in 2006, Dauman has received over $409 million in reported compensation, according to Equilar.

Dauman will be replaced by Viacom chief operating officer and his longtime right-hand man, Thomas Dooley, who will be interim CEO until Sept. 30, and then may stay on longer, according to the sources, who wished to remain anonymous because the discussions are confidential.

As part of the agreement, Dauman will stay on as executive chairman until Sept. 13 and be allowed to present his plan to sell a minority stake in Paramount Pictures to the Viacom board, the sources said.

Despite numerous reports late Thursday that predicted an imminent confirmation, neither Viacom and National Amusements had confirmed the news by early Friday in New York.

Sumner Redstone in May removed Dauman and Viacom board member George Abrams from the Sumner M. Redstone National Amusements Inc Trust. A spokesman for Redstone said the media mogul had been unhappy with the company’s performance and about Dauman’s plans to sell a stake in Paramount Pictures.

Dauman and Abrams shot back with their own lawsuit to prevent their removal from the trust, arguing that Redstone was being manipulated by his daughter, Shari. Shari Redstone called the allegation “absurd” and said her father made his own decisions.

Redstone also moved to kick Dauman and four other directors off the board in June, sparking litigation in Delaware to block the attempt.

Under the settlement, the board would add the five directors that National Amusements put forward in June. It is unclear when the directors that National Amusements moved to replace will leave the board.

Sumner Redstone’s granddaughter, Keryn Redstone, has filed a cross-complaint in connection to that lawsuit, and is planning to proceed with her lawsuit even if there is a settlement, according to a source familiar with the situation. However, that suit is unlikely to affect the removal of Dauman from Viacom and Redstone’s trust.

Dauman, who has worked with Sumner Redstone for more than 30 years, gained the title of executive chairman in February, when the media mogul relinquished that role. Shari Redstone had opposed Dauman’s elevation to executive chairman.

Shares of Viacom have fallen around 50 percent in the past two years as its cable networks, including MTV and Nickelodeon, suffered from falling ratings because younger viewers were migrating online and to mobile video. Viacom’s U.S. advertising revenue has declined for eight straight quarters.

Dauman has tried to turn Viacom around by wooing advertisers with data to better target commercials. Under his leadership, Viacom renewed a multi-year distribution contract with satellite TV provider Dish Network.

But it was Dauman’s plans to sell Viacom’s stake in Paramount Pictures, which investors cheered, that caused him troubles. Sumner Redstone, who won a long battle with media mogul Barry Diller to acquire the film studio in 1994, opposed the sale.

Barnes & Noblebks on Tuesday ousted its Chief Executive Officer Ron Boire less than one year into his tenure, saying he “was not a good fit” in an unusual rebuke for such a corporate announcement. The move plunges the No. 1 U.S. bookstore into new turmoil just as it tries to execute a new turnaround plan.

Boire, who took the reins of the struggling bookstore chain only last September, had previously been CEO of Sears Canada, also a struggling chain and before that, chief merchant at Sears Holdings shld, a retailer dealing with dramatic sales declines. Earlier this decade, Boire was CEO of Brookstone, a retailer that filed for Chapter 11 bankruptcy after he left.

The sudden departure of Boire creates new challenges for Barnes & Noble at a time it is trying to renew itself. In a turnaround plan Boire unveiled to Wall Street analysts barely two months ago, Barnes & Noble announced initiatives such as opening four concept stores in fiscal 2017 that will feature bars offering wine and beer, along with better food, in caf?s twice the size of its usual food spots, among other efforts to rejuvenate its business.

While Barnes & Noble’s business has stabilized as the growth of e-books has slowed, the retailer has pulled back on its Nook e-reader business and last year spun off its college bookstore division, putting fresh pressure on the company to prove it can make its core bookselling business grow again. In the fourth quarter of fiscal 2016 ended in April, Barnes & Noble's comparable-store sales fell 0.8% and the company expects those figures to rise only modestly in the current fiscal year.

When dismissing a top executive, most companies use bland language and outline the departing executives achievements. But in rare language, the company was more direct if vague about the reasons for the departure.

“The Board of Directors determined that Mr. Boire was not a good fit for the organization and that it was in the best interests of all parties for him to leave the Company,” Barnes & Noble said in a press release.

Other C-suite executives will take over his responsibilities while Barnes & Noble conducts. Meanwhile, Executive Chairman, Leonard Riggio, the retailer’s founder postponed his retirement, initially set to take place on September 14.

]]>http://fortune.com/2016/08/16/barnes-noble-ceo/feed/0Barnes & NoblepwahbaLululemon’s ‘Mystery’ Board Member Resignedhttp://fortune.com/2016/08/09/lululemon-rhoda-pitcher-resigns/
http://fortune.com/2016/08/09/lululemon-rhoda-pitcher-resigns/#respondTue, 09 Aug 2016 16:30:00 +0000http://fortune.com/?p=1762972]]>A mysterious, long-serving Lululemon Athletica board member has resigned from her position, just several weeks after various media outlets raised questions about her education and professional background.

In a filing with the Securities and Exchange Commission, Lululemon lulu said that Rhoda Pitcher, a board member since 2005, had on August 3 resigned from her position on the board and from all committees that she served on. Pitcher’s resignation “is not due to any disagreements with us on any of our operations, policies or practices.”

Fortune reached out to Pitcher and will update this story if she responds. Lululemon’s filing said she is leaving to “pursue other opportunities.” The resignation comes after Pitcher was elected to serve another three-year term on the board. Her current term had been set to expire at the 2018 annual meeting.

Pitcher generated headlines earlier this summer when The Street began calling board members at Lululemon to learn how they felt about Lululemon founder Chip Wilson’s recent public complaints about the company’s financial performance. But when the news outlet struggled to reach out to Pitcher, it questioned if she was a real person.

As Fortune and others pointed out, Pitcher is not a phantom board member, though her education and professional background was thin for a board member serving on a company of Lululemon’s size. Pitcher is a managing partner of her own management consulting firm and her bio says that she holds a master's degree from University Associates, which isn’t a standard, well-established college name you'd expect a board member to have. In fact, there doesn't appear to be any details about the school's master's program online.

Pitcher, along with Staplesspls co-founder Thomas Stemberg, had been Lululemon’s longest serving board member. The company had said that she was a valued member because her “considerable knowledge of our business gained from more than 10 years as a director of Lululemon makes her well suited to provide advice with respect to our strategic plans, culture and marketing programs.” She was paid $217,257 last year for her services.

]]>http://fortune.com/2016/08/09/lululemon-rhoda-pitcher-resigns/feed/0Lululemon Athletica Inc. Hong Kong store 2015johnnerkellThe Corporate World Is Evolving Much Faster than Warren Buffett or Jamie Dimonhttp://fortune.com/2016/07/22/the-corporate-world-is-evolving-much-faster-than-warren-buffett-or-jamie-dimon/
http://fortune.com/2016/07/22/the-corporate-world-is-evolving-much-faster-than-warren-buffett-or-jamie-dimon/#respondFri, 22 Jul 2016 15:30:59 +0000http://fortune.com/?p=1744586]]>It's not every day that Warren Buffett, Berkshire Hathaway's brk.a CEO, and Jamie Dimon, the CEO of J.P. Morgan, are upstaged by a group in the U.K. you've probably never heard of and a new British prime minister. That happened this week.

On Thursday, Buffett and Dimon, along with a handful of other large company CEOs, issued a call to action: "The health of America's public corporations and financial markets--and public trust in both--is critical to economic growth and a better financial future for American workers, retirees and investors," they said in a letter. "Our country, our economy and the future of our citizens depend on getting corporate governance right."

Attached to the letter was a list of practices they called "common sense corporate governance principles" that amounted to a basic outline of a code many U.S. public companies today already either agree with or live by, or both, including issues of who sits on the board, the kinds of topics the board should discuss, and the adoption of proxy access.

There was nothing innovative about Buffett and Dimon’s list. Although it includes the idea that directors might speak with shareholders, that was something the Business Roundtable outlined in principles it produced over a decade ago. So too was the call for a review of earnings guidance practices, which the CFA Institute and a panel of the Business Roundtable advocated ending 10 years ago. The Buffett-Dimon practices also included some responsibilities for asset managers. But assigning responsibilities to investors is not new either and the U.K. has produced a much heftier list of requirements in recent years, including six years ago.

Some of the practices are a rubber stamp on outmoded ways of thinking. For example, the CEOs recommend that boards "should have input into" rather than set its own agenda. True, in setting the agenda, a board would be wise to solicit the views of the CEO. But the board should do the setting and a company’s executives should be providing input in a way the board wishes them to. The list of practices also recommends stock-based compensation, which now, after nearly 15 years since Enron and WorldCom's collapses, is starting to lose its luster. In their recently released book, What They Do With Your Money: How the Financial System Fails Us and How to Fix It, Stephen Davis, Jon Lukomnik, and David Pitt-Watson explain how reliance on equity based compensation, "has enabled economic ADHD to jump from investors to directors.” “This is not healthy for our economy,” they say, noting that “forward-thinking board leaders” are starting to think differently.

The Buffett-Dimon letter does encourage dialogue on the topic of governance, which indeed would be valuable.

In contrast to their anemic foray into governance issues, conservative U.K. prime minister Theresa May last week made a bold call for action to create a British economy and society that "works for everyone." "Many of our political and business leaders ... they still don't get it ... [and] ... I want to see changes in the way that big business is governed," she said. The U.K.-based Institute of Directors, an organization of board members, "welcome[d]" her recommendations.

Responding to the idea that being held accountable was harmful to business, May said, "It is not anti-business to suggest that big business needs to change. Better governance will help these companies to take better decisions, for their own long-term benefit and that of the economy overall." She described the debt that companies owe society, saying, "It doesn't matter to me whether you're Amazon, Google or Starbucks, you have a duty to put something back, you have a debt to your fellow citizens, you have a responsibility to pay your taxes."

To address the growing gap between executive and worker pay, May advocated that shareholder say on pay votes be binding rather than advisory, as they are now in the U.S. and U.K.

May also called for big changes to who sits on boards so that they include employees, as is the case in some European countries: "In practice, [board members] are drawn from the same, narrow social and professional circles as the executive team and - as we have seen time and time again - the scrutiny they provide is just not good enough. So ... we're going to change that system.”May’s call goes well beyond the Buffett-Dimon memo, which recommended that corporate boards should be able to speak with management members “below the CEO's direct reports” without asking permission.

In addition to suffering May's upstaging, on Wednesday, the U.K.'s Financial Reporting Council (FRC) issued a report on "Corporate Culture and the Role of Boards." Unlike the Buffett-Dimon report, which overemphasizes the role of shareholders, the FRC report addresses the important work of companies in "building trust with stakeholders" and calls for "align[ing] values and strategies.” In contrast to Buffett and Dimon’s recommendations, the FRC report includes a wider variety of voices, including individuals who are not members of management.

One of the most interesting sections in the report includes suggestions on how a board can understand the real culture of the company they represent, including "listen to the internal grapevine and pick up quiet messages" and "review customer complaints and follow up." In the report, Rupert Soames, the chief executive of Serco, suggests that "individual [non-executive directors] popping in to [various locations of the business] to sniff the breeze works well."

It's not surprising that the U.K. is more innovative than the U.S. on many aspects of corporate governance. The system of separate chairs is well-installed there and the U.K. was far ahead of the U.S. in adopting practices like say on pay.

When I advise U.S. board members on what may be coming next, I suggest they look at what is happening in the U.K. because we have a habit of eventually adopting what they do. It would be great if Buffett-Dimon and other top U.S. executives could demonstrate the innovative thinking on governance our economy needs. But if they can't create their own good ideas on corporate governance, at least they should consider borrowing them from others who do.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://www.thevaluealliance.com), an independent board education and advisory firm she founded in 1999. She has been a regular contributor to Fortune since April 2010 and is the author of two books on corporate governance and valuation.

]]>http://fortune.com/2016/07/22/the-corporate-world-is-evolving-much-faster-than-warren-buffett-or-jamie-dimon/feed/0Berkshire Hathaway Inc. Annual General MeetingeleanorbloxhamWarren Buffett, Jamie Dimon Hold Secret Meetings to Save the Public Companyhttp://fortune.com/2016/07/21/warren-buffett-jamie-dimon-meeting/
http://fortune.com/2016/07/21/warren-buffett-jamie-dimon-meeting/#respondThu, 21 Jul 2016 16:11:04 +0000http://fortune.com/?p=1743748]]>It’s not every day that CEOs from some of America’s most valuable companies, across several different industries, meet in secret to plan the future of the American company.

But that’s exactly what leaders like Warren Buffett of Berkshire Hathaway, Jamie Dimon of JPMorgan Chase, and Mary Barra of General Motors, to name a few, have been doing intermittently over the past year, as they worked to put together a set of principles that should guide the governance of public companies at a time when fewer entrepreneurs are deciding to sell shares on public markets.

The meetings culminated in an open letter published Thursday morning on the website governanceprinciples.org. “Our future depends on [public] companies being managed effectively for long-term prosperity, which is why the governance of American companies is so important to every American,” the letter reads. “Corporate governance in recent years has often been an area of intense debate among investors, corporate leaders and other stakeholders. Yet, too often, that debate has generated more heat than light.”

Fortune waded into the debate last month, when it published it’s first-ever list of the 25 most important private companies, along with an essay by Geoff Colvin outlining the reasons why so many companies have decided to stay private. He wrote:

Companies are less likely than they used to be to need much capital. They can borrow money without giving up ownership at the lowest cost ever. If they need to sell an equity stake, PE and venture firms are so flush with cash that they may be lined up outside the door . . .

So why go public? Especially when you consider the many disadvantages, quite apart from activists. The process itself is costly. Underwriting and registration costs average 14% of the funds raised . . . Public companies face additional rules, notably those imposed by the Sarbanes--Oxley and Dodd-Frank laws in the U.S. Economists figure the costs may be enough to tip the balance against going public for smaller companies. In any case, the many disclosures required of public companies are rich with information for competitors to study. Then there's all the time managers spend dealing with Wall Street analysts and potentially thousands of shareholders.

The Dimon-Buffett proposal doesn’t present solutions for all these problems, but it does tackle issues like shareholder relations. “Our financial markets have become too obsessed with quarterly earnings forecasts,” it writes. “Companies should not feel obligated to provide earnings guidance -- and should do so only if they believe that providing such guidance is beneficial to shareholders.”

Not providing guidance would be a big change for many public companies, and may help free them from the short-term thinking that many business leaders believe dominate Wall Street and prevent them from taking the long-term bets that would enable them to compete with the nation’s most forward-thinking companies.

Other recommendations were aimed at improving the performance of corporate boards, which have been dogged by allegations that they are generally too beholden to CEOs and that individual board members spread themselves too thin by sitting on too many boards of companies in industries where they have little expertise. The Dimon-Buffett proposal argues that, for these reasons, boards should be mostly independent and have fewer members “so as to promote an open dialogue among directors.”

The proposals outlined in the letter do not address every criticism observers have lobbed at public companies in recent years, but with these changes coming from such high-profile business leaders, you can bet that these recommendations will be taken seriously across Corporate America.

]]>http://fortune.com/2016/07/21/warren-buffett-jamie-dimon-meeting/feed/0Squawk AlleychristopherrmatthewsIntel Adds Second Woman to Board of Directorshttp://fortune.com/2016/07/12/intel-second-woman-board/
http://fortune.com/2016/07/12/intel-second-woman-board/#respondTue, 12 Jul 2016 20:52:44 +0000http://fortune.com/?p=1731771]]>Intel added electrical engineering professor Dr. Tsu-Jae King Liu to its board of directors, marking just the second woman on the chipmaker’s governing body.

Liu joins lawyer and former ambassador Charlene Barshefsky as the only two women on Intel’s board. Ambassador Barshefsky, who served as United States Trade Representative, has served since 2004.

Liu, who teaches at University of California at Berkeley, has worked at the Xerox Palo Alto Research Center and Synopsys and holds over 90 patents. Her current areas of research include nanometer-scale logic, memory devices, and devices for energy-efficient electronics.

“She brings a wealth of expertise in silicon technology and innovation that will be valuable for Intel in many areas as we navigate a significant business transition while continuing to lead in advancing Moore's Law and harnessing its economic value,” Intel board chairman Andy Bryant said in a statement.

Liu did not replace any of the 10 existing board members, so the board will expand to 11 members, Intel intc noted. Under the company’s bylaws, the board can have from nine to 15 members. Other well-known outside board members at Intel include Harvard Business School professor David Yoffie and Reed Hundt, former chairman of the Federal Communications Commission.

Among other major tech companies, Apple's aapl eight-person board includes two women, Googlegoogl has three out of 12, Microsoftmsft has three women out of 10, and IBMibm has four out of 14, including CEO Virginia Rometty.

]]>http://fortune.com/2016/07/12/intel-second-woman-board/feed/0intelampressmanAnother Director of Hershey’s Controlling Trust Quithttp://fortune.com/2016/07/12/hershey-trust-resignation-mondelez/
http://fortune.com/2016/07/12/hershey-trust-resignation-mondelez/#respondTue, 12 Jul 2016 12:07:36 +0000http://fortune.com/?p=1730192]]>A board member of the charitable trust that controls Hershey Co hsy has resigned, the fourth such departure in less than 12 months, the trust said on Monday, at a time when the chocolate company is a takeover target for Mondelez International Inc mdlz.

While no explanation for the move was provided, the resignation came as the trust is locked in a bitter dispute with its direct overseer, the Pennsylvania Attorney General’s office, over its governance.

The $12 billion trust, set up by Hershey founder Milton Hershey over a century ago to fund and run a school for underprivileged children, must approve any sale of the company. Its affairs have been in the spotlight since Hershey rejected Mondelez’s $23 billion offer two weeks ago.

Joan Steel, a Hershey trustee, resigned over the weekend, trust spokesman Kent Jarrell said. He did not provide a reason for her resignation, but said the trust’s board would continue to function with its nine remaining members until her replacement is named.

Steel could not be immediately reached for comment.

Hershey shares rose 2 percent after Reuters first reported the news and were trading down 0.6 percent at $110.00 at mid-afternoon in New York. Mondelez’s offer last month, which was half in cash and half in stock, was worth around $107 per share, sources have previously said.

Steel’s departure follows the resignations of Hershey trustees Richard Zilmer, John Fry and Stephanie Bell-Rose over the past year.

Bell-Rose resigned this spring, three months after her appointment, because the position required more time than she had expected and interfered with her responsibilities as senior managing director at TIAA-CREF Financial Services, Jarrell said.

Fry, the president of Drexel University, informed the board earlier this year he was saddened to leave, but that his additional responsibilities at Greater Philadelphia Chamber of Commerce mean he would be unable to fulfill his many responsibilities, Jarrell said.

Zilmer gave no reason for his resignation, Jarrell added.

The attorney general’s office is investigating the trust for excessive spending and allowing board members to overstay their terms. The office has been asking three of the Hershey trustees, Velma Redmond, Joseph Senser and Robert Cavanaugh, to step down because they have exceeded the customary board term limits of 10 years.

Chief Deputy Attorney General Mark Pacella is seeking a voluntary settlement with the trust by the end of July, the Philadelphia Enquirer reported on July 8, citing internal memos. The attorney general’s office could petition the Dauphin County Orphans’ Court to remove board trustees if no settlement is reached.

]]>http://fortune.com/2016/07/12/hershey-trust-resignation-mondelez/feed/0Citing Rising Cost Of Ingredients, Hershey's Raises Prices 8 PercentgeoffreytsmithHere’s What Business Can Expect From U.K. Prime Minister Theresa Mayhttp://fortune.com/2016/07/11/prime-minister-theresa-may-business-agenda/
http://fortune.com/2016/07/11/prime-minister-theresa-may-business-agenda/#respondMon, 11 Jul 2016 17:18:45 +0000http://fortune.com/?p=1728120]]>Theresa May is set to become the U.K.’s second woman prime minister, following in the footsteps of Margaret Thatcher. But how much do the two have in common beyond their party allegiance and gender?

Not much, to judge by the keynote speech May delivered Monday in Birmingham, England’s second city and the heart of its industrial Midlands. Much of it could have been written by Tony Blair’s spin doctors of the early 1990s, stressing the need for a caring, healing, unifying government which sees its first duty as correcting the excesses of capitalism. Here’s some highlights of what she promised.

1. ‘Brexit Means Brexit’ (Whatever That Means)

Having supported David Cameron’s ‘Remain’ campaign in the referendum, May has some work to do to convince her party and the country that she really believes in leaving the European Union. But she has been consistent since June 23rd about the need to deliver the referendum’s mandate, and she did so again today: “Brexit means Brexit and we’re going to make a success of it. There will be no attempts to rejoin…by the back door, no second referendum” to overturn the first one. The thing is, nobody knows yet what the terms of Brexit will be. The key issue will be whether May prioritizes access to the EU’s Single Market, minimizing the impact on business, or control over immigration from the EU, which would mean forfeiting full Single Market access. But her speech gave nothing away on that point.

2. War on the “Fat Cats” of the Boardroom

Recognizing the role played by growing inequality in the referendum vote, May said she’ll tackle “the irrational, unhealthy and growing gap” between management and staff. She outlined “a vision of a country that works for everyone--not just the privileged few.” She then outlined a two-pronged attack on the poor corporate governance that has given being “the party of business” a bad name in recent years.

First, May said that workers should be represented on company boards, in a nod to a German model that has tended to deliver better industrial relations over the years. But in contrast to Germany, she said she also wanted consumers represented. She took a swing at the way that companies’ non-executive directors too often come from the same “narrow social and professional circles” as the managers they’re supposed to oversee, saying that “the scrutiny they provide is often just not good enough.”

Second, she said that she wanted shareholders to have more power over executive pay by making votes on annual pay awards binding, rather than advisory as they are now. Such a move would have stopped--for instance--BP Plc bpaqf chief executive Bob Dudley from getting the $20 million he was awarded for last year since nearly 60% of shareholders voted against it.

“We’re the Conservative Party, and yes, we’re the party of enterprise--but that does not mean we should be prepared to accept that ‘anything goes’,” May said.

3. No More ‘Asset-Stripping, Tax-Avoiding Mergers’

May spoke up for the right to intervene to stop undesirable takeovers, saying (without even the hint of a French accent) that “transient shareholders...are not the only people with an interest when firms are sold or closed.” She singled out Pfizer Inc.’s abortive bid for AstraZeneca Plc two years ago as an example of what her government could see as “undesirable,” pointing to Pfizer’s “record of asset-stripping” and its “self-professed” desire to cut its tax burden.

4. A Sharper Focus on Inequality

Conservatives haven’t traditionally set much store by inequality. When the party talks about it, it is usually only in terms of providing equality of opportunity, rather than outcomes. May went out of her way to anatomize that problem, but the sheer length of her agenda sounds more like a wish list than a series of deliverable remedies.

“Right now, if you’re born poor, you will die on average nine years earlier than others. If you’re black, you’re treated more harshly by the criminal justice system than if you’re white. If you’re a white, working-class boy, you’re less likely than anybody else to go to university. If you’re at a state school, you’re less likely to reach the top professions than if you’re educated privately. If you’re a woman, you still earn less than a man. If you suffer from mental health problems, there’s too often not enough help to hand. If you’re young, you’ll find it harder than ever before to own your own home.”

Interestingly, the one moment when her audience interrupted her with “hear, hear,” was when she complained of the “gaping chasm between a wealthy London and the rest of the country.” London was one of few places in England to vote Remain by a large margin. The Midlands, which has done well from the car industry’s revival over the recent decade, voted by and large to leave.

5. An election soon?

When a Conservative leader promises to put their party “completely, absolutely, unequivocally…at the service of ordinary working people,” you can be forgiven for thinking there’s an election in the air. May told Tory MPs two weeks ago that she wanted to avoid a snap election, and that probably won her some votes among colleagues reluctant to risk losing their seats only one year into a five-year term. But there are obvious problems with her mandate: she didn’t win the general election, she campaigned on the losing side of the referendum, and she doesn’t even have the blessing of the party membership thanks to the astonishing series of political suicides by her rivals. It also makes good tactical sense, given how much better the Tories have coped than Labour with their referendum-induced internal dysfunction. It will require some legal acrobatics: under existing law, parliament can only dissolve itself by a two-thirds majority vote in favor, or as the result of a no-confidence vote. But after the last couple of weeks, the sight of a Conservative majority in the House of Commons expressing no confidence in its own government won’t even register in the Top 5 Political Shocks of the Month. An election, of course, won’t end the uncertainties that will plague the Brexit process for the next two years. But it would at least remove one source of uncertainty for five.

]]>http://fortune.com/2016/07/11/prime-minister-theresa-may-business-agenda/feed/0Theresa May Launches Her Campaign For The Conservative LeadershipgeoffreytsmithMacy’s Next CEO Hints How He Plans to Shake the Retailer Out of Its Sales Slumphttp://fortune.com/2016/06/23/macys-next-ceo/
http://fortune.com/2016/06/23/macys-next-ceo/#respondThu, 23 Jun 2016 19:37:25 +0000http://fortune.com/?p=1709827]]>Macy’s stunned the world of retail on Thursday when it announced that longtime CEO Terry Lundgren would step down soon after the holiday season and be replaced by a handpicked lieutenant.

Even before the sales slump that has rocked the department store chain for the last five quarters, it was clear that Lundgren was setting the stage for his exit, having appointed former chief merchant Jeff Gennette, also a company veteran, as president two years ago. The Wall Street Journal reported that the Macy’s board accelerated the transition to give Gennette “the freedom to begin reshaping Macy's now.”

The transition comes amid one of the bumpiest periods in Macy’s history: it suffered its largest quarterly sales decline since the Great Recession in the first quarter of 2016. Macy’s leading position in apparel has been eroded by online stores like Amazon.comamzn, discount chains like TJX’s tjx T.J. Maxx, and fast-fashion chains like H&M. Adding to the pressure, traffic at malls continues to declines.

On Lundgren’s watch, Macy’s has tried to respond to these headwinds by launching its own chain of off-price fashion stores, called Backstage. In 2015, it bought hip beauty chain Bluemercury. All the while, Macy’s became the sixth largest online retailer in the country, with 2015 digital sales of $4 billion. This weekend, Macy’s will unveil the prototype of its store of the future in Columbus, Ohio. That location will feature, among other things, a much more interactive beauty section.

In an interview with Fortune, Lundgren and Gennette dropped hints of how the company will further modernize itself. It will build on its licensing model and will lease more space in its 800-plus department stores to outside specialty retailers and add to its in-store experiences.

“The reality is that the store business is where we’ve got to create more of an experience for customers who want to spend not just time,” says Lundgren, 65, who became CEO in 2003 and turned Macy’s into a national department store.

Introducing The Finish Line finl stores to Macy’s locations has been a big hit for the retailer in part because the retailer hadn’t been “credible in the athletic footwear arena,” says Gennette, who joined Macy’s in 1983 as an executive trainee and, like his boss, has climbed the ranks over three decades. Also, Best Buybby boutiques have helped Macy’s offering in electronics, a tough category for the retailer. Other such partnerships include Lids, and Sunglass Hut, the grandfather of such arrangements, which has made Macy’s an eyewear powerhouse.

As for Macy’s merchandise, both executives recognized that apparel has come to be seen as a commodity by many customers. So Macy’s is beefing up its exclusive merchandise and tapping its vendors to achieve that goal.

Nevertheless, the company expects sales to fall this year. For now, the company is not sure when it will get relief. “People are certainly trading down, we’ve clearly seen that,” Lundgren says. “Is that secular or is that temporary? That remains to be seen.”

Last year, the company announced it would shut 40 stores and cut 4,000 jobs. Macy’s is also looking into options to extract value from its major stores without spinning them off into a real estate investment trust. When Lungdren took over in 2003, Macy's had 394 department stores with annual sales of $15.44 billion in revenue. Now, thanks in large part to a 2005 acquisition of May Department Stores, that is up to 870 stores with 2015 sales of $27.1 billion.

]]>http://fortune.com/2016/06/23/macys-next-ceo/feed/0Macy'spwahbaThe Truth about Lululemon’s “Mystery” Board Memberhttp://fortune.com/2016/06/23/lululemon-board-mystery-pitcher/
http://fortune.com/2016/06/23/lululemon-board-mystery-pitcher/#respondThu, 23 Jun 2016 18:15:06 +0000http://fortune.com/?p=1709603]]>Early this week, Lululemon Athletica found itself in the news for a very peculiar reason: a news outlet questioned if apparel maker’s longest-serving board member was an actual person.

Spoiler alert: She is. But let’s dive into the back story.

First, in early June, Lululemon lulu founder Chip Wilson - who is no longer involved in active management of the company but holds a sizable stake in the Canadian-based company - lamented Lululemon’s financial performance. His argument? Lululemon had failed to reach the potential that other athletic gear players have achieved - most notably Nikenke and Under Armour ua - and Wilson in particular took aim at the board.

After that news unfolded, The Street started calling board members, especially angling to chat with the three longest-serving directors at the company. But The Street struggled to get in touch with one board member, Rhoda Pitcher, and even questioned if she was a real person. The publication also raised questions about Pitcher’s education and professional background, noting Pitcher has a thin web trail.

Lululemon’s filings with the Securities and Exchange Commission provides some information about Pitcher’s background. She has been a director since late 2005, before Lululemon went public, and was paid $217,257 last year for her services. Pitcher serves on the company’s compensation committee. She is again up for re-election in 2018 when her current term expires.

Since 1996 Pitcher has served as managing partner of her own management consulting firm. She also holds a master’s degree from University Associates (more on that in a moment). Lululemon touted her decades of experience as a consultant, as well as her long tenure on the board, in lauding her abilities as a member of the board.

Fortune reached out to Lululemon and through the company’s PR agency ICR, both of which confirmed her existence. Here’s the full statement that ICR sent, attributed to Lululemon board co-chairman David Mussafer. “Rhoda M. Pitcher is a valued member of the Lululemon Board of Directors who has contributed to our collective success for more than a decade. With four additions to the Board of Directors in the past two years, we have the right Board in place aligned with management to execute successfully on our five year plan.”

ICR declined to make Pitcher available for comment. Fortune was able to track down her phone number and left several messages, all of which went unanswered.

That’s not completely unheard of.

“There are quite a few board members of public companies who never speak to the media,” says Eleanor Bloxham, CEO of board education and advisory firm The Value Alliance and Corporate Governance Alliance. “That level of privacy isn’t unusual.”

What is unusual, according to Bloxham, is Pitcher’s education background. Take that master’s from University Associates; it isn’t a standard, well-established college name you’d expect a board member to have. Fortune couldn’t find a web presence for that school. Outdated information about the program says it provides training programs and helps managers become savvier at consulting and other corporate needs. There doesn’t appear to be any details about the school’s master’s program online. While board members aren’t always expected to attend elite universities, generally they go to well-known, established institutions.

Beyond Lululemon’s word that Pitcher is legit, Fortune did a little more digging. Research that went into a Fortune story in 2013 about some of the company’s missteps at the time found that it was Pitcher who introduced Wilson to Christine Day, who held the CEO title for several years beginning in 2008. Pitcher also reportedly did some consulting work for Starbuckssbux.

While it may seem counterintuitive that board members at publicly traded companies can remain so secretive, experts say that isn’t so unusual. Companies generally prefer that their board members don’t speak to the media and it has only been in recent years that publications have named board members in their stories. The level of openness that’s expected today is actually a step forward from what it was like in the past.

Bloxham argues that’s positive momentum, saying the level of scrutiny that individual board members face today doesn’t match up with the level of power those individuals hold over the companies they oversee.

Beth Kowitt contributed to this report.

]]>http://fortune.com/2016/06/23/lululemon-board-mystery-pitcher/feed/0Lululemon Founder To Step Down After Commments About The Brand's Customers Bodiesjohnnerkell